Like the blink of an eye, holidays come and go at lightning speed. A common term in football is “three and out,” and it’s followed by a punt. In life, the three and out are Thanksgiving, Christmas and New Year’s.
From a financial perspective, many people do punt following the big
three holidays. In other words, they begin the next year by going though
the same motions as the previous year. As we reach the apex of the
holidays, please don’t just turn the page to 2014.
Can you imagine going to a football game and watching the offense run
the exact same play over and over? Well, that’s what many households do
with their finances. As we close the book on 2013 and open the pages to
2014, I urge you to review 2013 and develop a game plan for 2014.
Because if circumstances haven’t already changed, they’re soon going to.
Look at 2014 as an opportunity to implement some new offensive plays.
Take your 401(k) for example. Instead of just sticking with the status
quo, consider reviewing your menu of investment choices and increasing
your contribution every pay period.
Other examples would be paying down the principal on your mortgage or
opening a new type of investment account. In short, don’t just wake up
and assume your 2013 game plan is going to work in 2014. Instead, act
like a football coach and add some new plays to your playbook.
That being said, 2013 was probably a pretty good year for many
investors. At the other end of the spectrum, however, others were
stunned about what recently happened to their health insurance premiums.
But everyone may soon realize that 2013 had several other steep
increases when they prepare to file their tax returns.
Because most people get paid once or twice a month, they may not be
aware that they had an increase in the amount being withheld for Social
Security taxes. On an income of $100,000, this amounted to about a
$2,000 increase over the year. But there plenty more increases for 2014
waiting in the wings.
People at the high end of the income scale will find the top tax bracket
has increased from 35 percent to 40.5 percent. The tax rate on interest
income has jumped from 35 percent to 43.4 percent, and the capital
gains tax went from 15 percent to 23.8 percent. High-income earners will
also discover that the Affordable Care Act has upped the Medicare tax
from 1.45 percent to 2.35 percent.
The reality is, with pensions becoming dinosaurs, personal investment
decisions are more important than ever. That, combined with increasing
taxes and ever-changing government rules, suggests that new game plans
are in order.
Just closing the book on one year and opening the book on the next
without any kind of financial inventory or a change in your financial
game plan is a recipe for mediocrity. But with a little effort and
thoughtful planning, I’m confident you can make 2014 a good financial
However, even with the taller financial hurdles ahead, when you consider
the big picture, many of us are very fortunate. This is the time of
year to be generous to the less fortunate. So, to all my readers, I wish
good fortune and a Merry Christmas.